Deutsche Bank’s Appetite for Risk Throws Off Its Balance

Landon Thomas Jr., The New York Times

The global banking giants, think of JPMorgan Chase or HSBC, make a nice return by capturing their share of the trillions of dollars that course through financial markets each day.

But few are as reliant on this business, be it swapping currencies, selling bonds or structuring derivatives — as Deutsche Bank, the giant lender that has made its name not as a home for German savers but as a place for hedge funds and other risk-loving investors to put on some of their boldest financial bets.

And that is why its swooning stock price last week set off alarm bells in finance ministries, central bank suites and trading floors from Hong Kong to New York.

More than eight years after the collapse of Lehman Brothers sent shock waves around the world, the fear is whether Deutsche Bank and its highly leveraged balance sheet of 1.6 trillion euros might teeter and set off another bout of financial contagion.

Those worries calmed down somewhat late last week as Deutsche Bank’s shares rose after reports that the bank may be close to cutting a deal with the United States Justice Department regarding the fine it must pay for selling toxic mortgages during the financial crisis. Read more